High inflation continues to impact Swedish economy
The weakening economic situation has pushed the Swedish economy into recession in 2023. High inflation and higher interest rates combined with waning international demand are the primary reasons for the flagging economy. These are the conclusions of a new forecast of the economic outlook from the Ministry of Finance. At the same time, Minister for Finance Elisabeth Svantesson reports that the reforms in the forthcoming autumn budget will amount to an estimated SEK 40 billion.
High inflation continues to put a strain on households and businesses. The combination of high prices and higher interest rates is curbing household consumption. Housing construction is also down, which hinders growth. The Ministry of Finance has assessed that Sweden’s GDP will decrease by 0.8 per cent this year.
Inflation has decreased somewhat in recent months, both in Sweden and in other countries.
“We see some bright spots with a lower rate of inflation, but core inflation remains too high. This puts a heavy burden on households and businesses, and is a contributing factor to the Swedish economy entering a recession. Now we must stay the course in fighting inflation so that we can reverse the trend in the Swedish economy,” says Ms Svantesson.
The Swedish labour market remains strong, with a record-high employment rate. Due to the economic downturn, however, unemployment is expected to rise in 2023 and 2024. The economy is expected to start to rebound in 2025, which will lead to increased demand for labour.
The forecast is clouded by several factors of uncertainty. Persistent inflation, the trend in the housing and property market, and geopolitical developments are some of those factors.
“We find ourselves not only in a strained economic situation, but also a difficult security situation. The focus must be on getting inflation down while prioritising necessary measures to strengthen the justice system and defence,” says Ms Svantesson.
In a few weeks, the Government will present its Budget Bill for next year. The budget will reflect the economic situation.
“We will have to make some tough choices so as to avoid fuelling inflation. At the same time, vulnerable households and the welfare system will obviously need support during this difficult period, and we will not abandon them in their time of need. Our assessment is that the reforms in the budget will total approximately SEK 40 billion,” says Ms Svantesson.
Press Secretary to Minister for Finance Elisabeth Svantesson
Phone (switchboard) +46 8 405 10 00
Mobile +46 76 141 14 79
email to Niklas Gillström
Head of the Macroeconomic Forecasting Division
Phone +46 8 405 96 21
email to Karine Raoufinia, via senior registry clerk